United Spirits, Radico Khaitan to be key beneficiaries of premiumization-led growth, says Antique Broking; raises target

United Spirits and Radico Khaitan shares have seen a decent growth of more than 40% each in the past one year. This upward trend is driven by robust sales volumes and increased realizations, particularly within the premium segment, which continues to attract substantial interest.

The alcobev industry is expected to continue to witness strong premiumization-led growth over the next three years, and United Spirits, Radico Khaitan would be the key beneficiaries, according to Antique Stock Broking.

The strong growth visibility should help companies to re-rate from current levels, the brokerage firm said in a report as it maintains a positive stance on United Spirits and Radico Khaitan.

Also Read: Radico Khaitan, United Spirits and more: 5 liquor stocks surged 10%-88% in last one year

It maintained a ‘Buy’ rating on United Spirits and raised the target price to ₹1,513 per share from ₹1,412 earlier, valuing at 60x PER. It also has a ‘Buy’ call on Radico Khaitan and has raised the target price to ₹1,996 per share from ₹1,849 previously, valuing it at 45x PER.

United Spirits | Buy | TP: ₹1,513

United Spirits’ millionaire brands have grown 1% YoY in CY2023 driven by strong growth in mid and upper P&A segments. Relaunched brands like Royal Challenge and Signature have driven overall performance, growing by 19% and 16% YoY, respectively.

As per Antique Stock Broking, the rebranding of Royal Challenge and launch of Royal Challenge American Pride have been the key drivers.

It expects the company to clock a net profit of ₹1,435.2 crore upon a revenue of ₹11,817.5 crore in FY25.

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Radico Khaitan | Buy | TP: ₹1,996

Radico Khaitan outperformed peers with its millionaire brands growing by 7% YoY in 2023. During the year, 1965 Spirit of Victory Rum crossed a million cases (grew 32% to 1.2 million cases), taking its total millionaire brands to seven. Even on a four-year CAGR basis, Radico Khaitan has outperformed peers with 7% CAGR versus it being flat for United Spirits and 2% for Pernod Ricard, Antique Stock Broking said.

The opening of restaurants and bars (on-trade) led to strong recovery of Magic Moments vodka driving volume growth of 29% YoY to 6.2 million cases. Magic Moments is now the 6th largest vodka brand globally, it added.

Radico Khaitan is estimated to report a profit of ₹415.5 crore and a revenue of ₹4,996 crore in FY25.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.